THE SIGNIFICANCE OF RECENT SOVIET GOLD SALES
TlIIS MATERIAl^CQNTAINS INFORMATION AFFECJIHG -THE" NATIONAL DEFENSE OF THE- uHJTED STATES" WITHIN THE MEANING OF TBKSC,, Tjn^KftNSMISSION OR REVEIA*MQN OF WHICHTO AN UNAUTHORIZED PERSOfriS^t
CENTRAL INTELLIGENCE AGENCY Office of Research and Reports
iit mi T
Soviet Gold Export
Purpose of Recent Soviet Gold Shipments
Certain Effects of Soviet Gold **
Sources and Evaluation of Sources
Soviet Shipments of
Index of Purchasing Pover of Soviet Gold Sold In the West,
Shipments of Gold, .
Snipments from the Satellite
ore listed ay Possible sales
are not included.
b. Based oti1
The site of the total gold shipmentsj does not in Use' hoover, constitute indisputable evidenceadical nev policy regardins liquidation of sold sloths. On the otlier hand, continue tion of shipments at tlie level of the lastonths3 would
Footnote references to arabic numerals arc.to.sources listed in the Appendix.
factors lcesT uestion would be raised, fyjyfi
f-sufficiency to expend laryc production.
A significant factor In assessing the relative advantages of gold production with respect tothe" Soviet domestic production of goods is the value of gold in terms of what it vill purchase In Western markets. Tableontains data vhlch permitomparison and which reveal that tbe USSR found It substantially more advantageous prlccwlce togold Inss than it finds today. Furthermore, lt was probably Impossible for the Hussions to produce adequateof certain goods at home' in' tbe lO-Jo'sj-whereas today the country can produce most essentials. Consequently, lt is probably not now in the interestountry devoted to se. quantities of capital and labor to gold
estimates that thiillion toaillii current Soviet gold stock)
His currently producing goldate oy ounces annually. The CIA estimate of approximatelyillion. 2/ At today'sate of production equal to thc lower range of this estimate vould permit tbe USSR to continue gold shipments indefinitely at the rate of the past few years without drawingeserves. The higherale of productionapability ccos Id-Drably larger.
2. Purpose of Recent Soviet Cold Shipnenta.
Tlio most plausible reason for thelc *htpmj;lG might be that the USSRable balanco of payments deficit with the Went and lu aeeumulatlnp. the fore-Inn OXOhaogS neccneary to maet this deficit. Specifically> first t> aonthshe USSR importedillion acre than il exported to the sum ling area.
* . 3.
. ; Table 2
Index of Purchasing Power of Soviet Gold Sold In the West
UK Cojmaodlty Price of. ividedPrices V Goldl)
ased upon USased upon Zurich price for gold IngotsS per troy ounce.
Since then the USSR haa paid aboutillion (in sterling) to Canada, purchased Australian wool forillion pounds sterlingnd placed new orders for butter and meat which can be paid for in sterling. 5/ Other negotiations and agreements indicate further Imbalances which the USSR may be preparing to meet. Over and above sterling needs, the USSR Is felt to be in need of Swiss francs, which may also help account for the recent Increase in gold sales. 6/
Another likelihood is that the USSR say be anticipating tbe need to purchase quantities of goods in the West In order to Implement thc recent announcements of increased consumer goods for the Soviet If the consumer goods distribution goals ore to be met,
purchase* abroad, especially ln the case of neat and fats, will have to be mode, at least ln the short run. The amount of gold that would be sold for this purpose Is dependent upon the size of the gap-between domcBtlc production and the consumption to be filled by imports, In addition to the increased emphasis on consumer goods, tbe pattern of procurements. abroad Jujs continue import.of .capital goods andminerals.
It Is also possible that recent Soviet gold sales ore designed to provide funds for covert activities of one sort or another. Recent receipt by banks, of the Hew .York Federal Reserve; District ofillion in US currency from the State Bank of the USSR (Gosbank) j/ would tend to discredit this possibility, however. Inasmuch as it-would be difficult toore acceptable means of financing such activities than by the use of currency*!
Alternatively It has been suggested that the USSR is disposing of Its gold stocks because these stocks would be strategically useless in The inference could therefore be mode that such disposition night be an indicationoviet'Intention to go to war. Such an Inference is not Justified, however, because it Is likely that the recent Soviet offering of strategic commodltlea (including chrome, nickel, manganese, sliver, platinum, and petroleum products) and its commitments to export these goods are as Important strategically as any goods It might obtain through gold sales.
It should be remembered, however, that the DSSRully employed economy where an increase over present gold outputeduction in productive fac.torsayailable elsewhereor, example, in the. production of other goods and services. Because the USSR would be unfiling to reduce other production in order to increnne the production of gold and because its gold reserves ore limited, gold exports alone would be ableemall contribution to the total effort to supply consumer goods to thc Soviet population.
3- Certain Effects of Soviet Gold Sales.
There can be no doubt but that Soviet gold sules have contributed to the recont decline in world gold prices. Other equally Important factors, however, have Included the recirculation of hoarded gold, the reduced Asiatic demand, and the generally improving economic conditions in Europe leading to revived confidence in the possibilityheck on inflation and currency depreciation. The price of gold, in fact, has been declining As early eshe Economistthat the price was "unlikely to recover unless/ Thus thc appearance of Soviet gold on on already weak
market contributed to the recent decline In the price of gold to the support level0 per troy ounce.
The USSR Is veil avare of the effect of declining gold prices on its ability to purchase goods abroad. In recent months, Soviet spokesmen have commented on the hardships endured by US alliesof the US insistence on maintaining its present gold policy, fj It Is likely, however, that the USSR has more interest inifference among the Western countries and the possibility ofigher price for its own gold exports than that it has In the welfare of the allies of tho US.
An interesting aspect of continued Soviet gold sales Is thatbenefits could occur to the West similar to the recentIn the gold reserve position of the French Stabilization Fund. These benefits Involve the strengthening of Western central bank reservesonsequent hastening of the-establishment of currency convertibility. This situation vould arise largely because of the decline of vorld gold prices and thc nevly found capability of Western central banks to augment their gold reserves through purchases in the open market.
SOURCES AND EVALUATION OF SOURCES
Evaluations, following the classification entry and designatedhave the following significance:
Confirmed by other sources
Hot usually reliable
Cannot be judged
Cannot be Judged
not otherwise designated are those appearing on thc cited document! those designated "RR" are by the author of this No "RR" evaluation is given when the author agrees with the evaluation of the cited document.
1. This table is derivedumber of overt and covert sources
ranging in classificationo S, US OFFICIALS ONLY, and ^ Eval.o RR ' "'UliB available on reques
3- IMF, International Financial Statistics,
U. Eval. RR 2. IMP* International Financial Statistics, U. Eval. RR 1.
Globe and Mail, gl U. Eval.f Tndia. . n ' do o
Christian Science Monitor, U. Eval. RR 2.
uoting Swiss newspaper
Die Tat, l6 R- 1
6. The Ectnomist, U. Eval. fill P. 9. Washington U. Evul. RR 2.
Current Digest of the Soviet Press, Vol. V, Ko. lUl, quoting Izvestiya, U. Eval. rr l.Original document.